FIA and ISDA have responded to the Commodity Futures Trading Commission's notice of proposed rulemaking on recovery and orderly wind-down plans for derivatives clearing organizations (DCOs).
Both associations acknowledge that the matters of central counterparty recovery, resolution, and wind-down planning are paramount to preserving financial stability. They also welcome the CFTC's well-balanced proposal, which outlines an analysis that DCOs have to perform while preserving the flexibility required by DCOs to adapt to varying circumstances.
The response advocates for:
- A requirement to limit clearing members’ exposures during recovery and resolution
- Non-default losses to be borne by DCOs
- Clearing participants incurring losses due to the use of recovery measures to be fairly compensated via future CCP profit-sharing
- Clearing participants to be adequately involved in the design phase of recovery and wind-down plans
- DCOs to meticulously assess any potential impact of measures (such as specific recovery tools) within their plans on clearing participants and other stakeholders.
Read the response in full here.
- CCP Recovery and Resolution
- Operational and Regulatory Guidance